Texas experienced both legislative and regulatory changes. H.B. 500 enacted a temporary margin tax rate reduction and expanded certain deductions. A change to 34 TAC §3.588 provides guidance regarding the cost of goods sold rule. Additionally, the rule allows taxpayers to change their margin tax computation method on an amended report and while under audit.

PwC continues its leadership in the Multistate Tax Compact debate this quarter by issuing two articles. The first begins here on page 5 and explores the impact of Compact withdrawals on the joint audit program. The second, published in State Notes, examines the Gillette decision and the significance of interstate agreements.

Every item in the developments section, starting on page 12, links to a PwC Insight that provides analysis and observations regarding the development. Insights this quarter examine the Multistate Tax Compact apportionment election, nexus developments, budget and legislative proposals, and other significant state and local tax matters. One trend to observe is the expansion of nexus both legislatively and though case law. In this quarter, we report on four states that enacted expanded nexus laws– though affiliate or agency nexus provisions - and two state court decisions that upheld the application of expanded nexus concepts.